How new laws have changed beer market

President Kibaki’s assent to the alcoholic drinks regulations is promising a near overhaul of Kenya’s liquor market and a change in the fortunes of hundreds of players in the manufacturing and marketing chain.

Mr Kibaki signed the regulations into law on Wednesday, reversing a 30-year ban on brewing and consumption of traditional liquor, setting in motion what could loosen the mainstream brewers and distillers’ grip on the market and set new rules on how Kenyans will consume alcohol.

Key provisions of the new law include the ban on the vending of liquor within a radius of 300 metres from learning institutions — a move that signals the imminent closure of thousands of bars, and wines and spirits shops countrywide.

Retail outlets such as supermarkets will have to carve out special rooms — that are not accessible to persons under the age of 18 years — within their shopping floors, a condition most retailers say would be too costly, making it more rational to eliminate alcohol from their shop shelves altogether.

Parliament passed the new laws early this year aiming to regulate consumption of illicit brews that have claimed hundreds of lives and maimed thousands others as well as to protect minors from alcohol addiction.

Brewers and financial analysts said the regulations have the potential of upsetting established players such as East African Breweries Limited (EABL), Kenya Wines Agencies Limited (Kwal) and Keroche Industries.

EABL’s corporate affairs director Ken Kariuki described the regulations as posing a big threat to the company’s business in their current form.

“The spirit of the law was to discourage underage drinking not punish businesses that have existed years before the schools,” said Mr Kariuki.

He, however, said the mover of the Alcoholic Drinks Control Bill 2009 Naivasha MP John Mututho had agreed to push for amendment of the limitation on pubs in residential areas.

A lifting of the ban on traditional liquor is promising the mainstream players a tough battle for control of the bottom end of the market — that has in the past five years emerged as the new frontier for growth.

Census results published on Tuesday confirmed this trend in its finding that Kenya’s population is rapidly urbanizing¬ – driven by the migration of persons aged between 15 and 34 years — forcing firms to sell small-sized low-priced goods to move volumes.

EABL’s results show that the bottom end of the market where the brewing giant sells its Senator Keg brand and a range of low-priced spirits recorded the fastest volumes growth over the past five years. Senator keg grew volumes by 14 per cent in the year to June.

The brewer serves this market with the Cane spirits brand, which accounts for about 70 per cent of its spirits volumes and the Senator Keg, which delivers large volumes but lower value compared to flagships Tusker, White Cap and Pilsner brands.

The coming into force of the Alcoholic Drinks Control Act 2009 in 90 days is expected to spur a proliferation of thousands of small brewers targeting the bottom end of the market.